This article was published on 3 July 2010. Some information may be out of date.

Generous KiwiSaver first home help applies to many

The first of the KiwiSaver first home withdrawals and subsidies will be paid out shortly. But many people still don’t realise just how good — and how widely available — the KiwiSaver first home help is. It is clearly the best place for any New Zealander to save for a first home.

Let’s look at Ben, who starts out earning $50,000, and his pay rises by 3.5 per cent a year.

If he saves 2 per cent of his pay outside KiwiSaver, in an account that pays 3.5 per cent a year, after ten years he will have about $15,900. But if Ben saves the same amount in KiwiSaver at the same return, his account will total about $45,600 — almost three times as much.

True, he will have to leave $11,400 — the government’s kick-start and tax credits — in the account. But $34,200 — made up of his contributions, his employer’s contributions and returns on all the money — could go into his new house. That’s way more than twice as much as outside KiwiSaver.

If Ben’s partner is in similar circumstances and does the same thing, they could have a deposit of close to $70,000, as well as around $11,400 each in retirement savings.

This first home withdrawal applies to anyone on any income, buying a house at any price and contributing to KiwiSaver at any level — as long as you have been in KiwiSaver at least three years.

But wait, there’s more! You may qualify for a subsidy of $3,000 after three years in KiwiSaver, rising to $5,000 after five years, administered by Housing New Zealand. How do you qualify? Firstly, you have to contribute at the following minimum levels:

  • From July 2007 to 31 March 2009, 4 per cent of your income if you are an employee, and “about 4 per cent” if you are a non-employee — including the self-employed, beneficiaries and others not in the work force.
  • Since April 2009, 2 per cent of your income if you are an employee, beneficiary or self-employed. For others it’s 2 per cent of the minimum wage.

Also, your house must cost less than $400,000 in Auckland City, North Shore City, Rodney District, Wellington City and Queenstown Lakes District, and $300,000 elsewhere.

Finally, a single person or couple must have “household” income of less than $100,000. For three people, it’s $140,000. However, this is not as limiting as it might at first seem.

Recently I asked Housing NZ what might happen if only one person in a couple was eligible for the subsidy, or if one earned less than $100,000 but the couple earned more than that. Could the eligible partner buy the home on their own, receive the subsidy and withdrawal, and later transfer the home into joint ownership?

I was rather surprised at the spokesman’s reply. “The deposit subsidy is an individual application based on household income. Household income means the people purchasing the house with you i.e. those named on the sale and purchase agreement. If the title is registered in the name of the applicant only, then the income of anyone else who lives in the house is irrelevant.” This applies even to spouses. In short, then, their answer is “Yes.”

The withdrawn and subsidy money must go directly into the purchase of a home or land on which you build within 12 months.

A previous home owner who can show Housing New Zealand that they are in the same financial situation as a first home buyer — perhaps after a divorce or major financial problems — may also be eligible for the withdrawal and subsidy.

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Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it.